Vietnam's exports, factory output fall in Feb but Red Sea impact limited

By Khanh Vu and Phuong Nguyen

HANOI (Reuters) - Vietnam's exports and industrial production in February fell significantly from a year ago, government data showed on Thursday, with economists attributing the drop to the Lunar New Year long holiday rather than to the Red Sea shipping crisis.

The export-reliant country, which is one of the top trading partners for the United States and European Union states, recorded exports this month fell 5% from a year earlier and industrial production contracted by 6.8%, preliminary estimates from the General Statistics Office (GSO) showed.

Disruptions of shipping through the Red Sea caused by the Houthis' attacks from Yemen in support of Palestinians fighting in Gaza have resulted in a 55%-73% increase in costs for cargoes from Vietnam, according to estimates from the country's trade ministry cited by state media.

That poses risks to Vietnam, warned Hanoi-based economist Vo Tri Thanh, but he noted that February's bad performance was mostly because the week-long celebrations for the Lunar New Year, known as Tet in Vietnam, fell in February this year. In 2023, the holiday was in January and that affected the statistical comparison, he said.

"The data for the first two months of this year, however, still look upbeat," Thanh said.

Both exports and industrial production showed healthy increases in the first two months of 2024 compared to the same period last year thanks to a massive expansion in January, preliminary estimates showed.

For January and February, exports rose 19.2% from a year earlier to $59.34 billion, while imports were up 18% to $54.62 billion, according to the report. This translated into a trade surplus of $4.72 billion.

The industrial production index in the January-February period rose 5.7% from a year earlier, swinging from a decline of 2.9% in the same period last year, the GSO said.

"While there was a sharp drop in exports and industrial production in February, the extent is not out of the norm for Vietnam during Tet," said Darren Tay, an analyst at BMI Research, noting it was still too early to say if the Red Sea turmoil was having an impact.

Can Van Luc, a government adviser and an economist at the Bank for Investment and Development of Vietnam, said the impact of the crisis on Vietnam's exports remained "limited".

Consumer prices in February rose 3.98% from a year earlier, the GSO said, adding that retail sales in the month rose 8.5% from a year earlier.

(Reporting by Khanh Vu and Phuong Nguyen; Editing by Francesco Guarascio and Christian Schmollinger)